California’s Tax Credit Bidding ‘Hasta La Vista’ To Buyers

California is burning through the cash it has set aside to entice first-time home buyers to purchase homes.

Last month, the state began offering a tax credit to first-timers who can get back 5% of the purchase price of their home up to $10,000, payable over three years. California pledged $100 million for the credit, which expires on Dec. 31 or until the cash is exhausted—and it looks like that could happen very soon.

Through last Tuesday, the state had received more than 15,000 tax credit applications for nearly $78 million in tax credits, according to the state’s Franchise Tax Board. At the current rate, that means it would reach the $100 million mark by the end of June. Of course, not all of those applications may qualify, and the state has said it will accept at least 28,000 applications so that it has enough valid applications to use up the entire $100 million.

California is also offering a tax credit for those who purchase new homes. That credit, which also offers $10,000 over three years, has received applications worth nearly $36.4 million, and seems less likely to run out of cash soon. That means new homes could begin looking a bit more attractive for some buyers (of course, this assumes that mom-and-pop sellers don’t begin to reduce their prices once the tax-credit prop goes away).

There have been early signals that home-buying activity had plunged in many markets after the federal tax credit expired on April 30, but California appears to have largely avoided the swoon thanks, in part, to the state tax credit. While many markets have reported 25% drops in new contracts signed in May from one year earlier, the declines have been more modest in certain California markets. Contracts were up 16% in Los Angeles from a year earlier, for example, up 15% in the Napa region, up 2% in San Francisco’s East Bay, and down 3% in San Diego.